L & T Infocity Ltd Vs Commissioner of Central Excise & Service Tax (CESTAT Hyderabad)
CESTAT Hyderabad held that parking charges collected for providing parking space is liable for inclusion in the value of Management, Maintenance or Repair services and accordingly, service tax is payable on the same.
Facts- The Appellants are provides the service of ‘renting of immovable property’ and maintenance of common areas of the building under separate agreements.
Taking a view that the amounts collected by the Appellant towards – electricity, diesel charges for DG sets, water and parking charges would be liable for service tax under the category of ‘Management, Maintenance or Repair Service’, SCN dated 15.10.2012 was issued for the period 2007-08 to 2011-12, demanding service tax of Rs. 10,76,89,485/- towards (i) electricity charges, (ii) diesel charges and (iii) water charges received by the Appellants from their tenants/occupants as reimbursable expenditure and (iv) Rs.86,13,978/- towards non-inclusion of parking charges in the value of taxable services.
The issue involved in the Appeals is whether the service tax is payable on reimbursable expenses, amounts collected towards provision of water, electricity, diesel and parking charges under the category of ‘Management, Maintenance or Repair services’.
Conclusion- Held that the amount collected towards water, electricity and diesel are in the nature of reimbursable expenses and therefore, not liable for inclusion in the taxable value towards provision of Management, Maintenance or Repair services by the Appellant.
Held that the parking charges are liable for inclusion in the value of Management, Maintenance or Repair services, being provided by the Appellants. Relying on this service, the parking charges were considered as liable to service tax under the category of Management, Maintenance or Repair service. It is also not disputed that he has not collected the parking charges on reimbursable basis. There is nothing on record to indicate anything to the contrary. Therefore, the argument that no service tax is payable is not sustainable. The Appellants were required to provide parking space and it’s clearly part of maintenance service. Hence the amount collected also needs to be included in the gross value.
FULL TEXT OF THE CESTAT HYDERABAD ORDER
The Appellants are providing the service of ‘renting of immovable property’ and maintenance of common areas of the building under separate Agreements. They are registered with the Department and complying regularly. Taking a view that the amounts collected by the Appellant towards – electricity, diesel charges for DG sets, water and parking charges would be liable for service tax under the category of ‘Management, Maintenance or Repair Service’, SCN dated 15.10.2012 was issued for the period 2007-08 to 2011-12, demanding service tax of Rs. 10,76,89,485/- towards (i) electricity charges, (ii) diesel charges and (iii) water charges received by the Appellants from their tenants/occupants as reimbursable expenditure and (iv) Rs.86,13,978/- towards non-inclusion of parking charges in the value of taxable services. Another SCN dated 04.11.2013 was also issued on the similar grounds for the period 2012 to 2013. Both these SCNs were adjudicated on contest by the concerned Adjudicating Authorities vide OIO dated 24.09.2013 & OIO dated 20.03.2015, respectively.
2. Since the issue is common in both the Appeals (SCNs), even though the Adjudicating Authorities have taken different stand, in so far as confirming the demands, the Appeals filed by the Appellant/Assessee against both the impugned orders are taken up for Hearing together. The issue involved in both the Appeals is whether the service tax is payable on reimbursable expenses , amounts collected towards provision of water, electricity, diesel and parking charges under the category of ‘Management, Maintenance or Repair services’, in the given facts of the case or otherwise. The stand of the Revenue in both the Appeals has been that the Appellants were found to have not included the charges incurred on water, electricity, diesel and parking in the taxable value of services provided under the head – Management, Maintenance or Repair service. The Department observed that the Appellants were rendering services of management, maintenance of immovable properties to the occupants by entering into Agreements with them and they are paying service tax on maintenance charges, but they are not including water, electricity and diesel charges being reimbursed by the occupants in the value of the taxable service. It was also observed that the Appellants are collecting parking charges but not including these charges in the value of taxable services. The Department verified sample Agreements to come to the conclusion that the Appellants are collecting reimbursable expenditure incurred towards water, electricity, diesel and also parking charges.
3. In order to understand the exact scope of this reimbursement charges being collected by the Appellant, the relevant paras of SCN are reproduced below.
“i) Section 5: Reimbursement of Electricity charges:
LTIL shall provide independent energy meters for lighting, UPS and AHU Power loads for each module. LTIL shall provide a separate common meter for the chillers, the consumption of which will be apportioned to various modules based on the AHU meter consumption of each module. The electricity consumption for common area lighting, elevators, pumps, etc., shall be apportioned pro rata to the space occupied by the Occupant. LTIL will submit invoices to the Occupant by the 25th of each month and Occupant shall reimburse the amounts paid by the LTIL towards electricity charges on or before 10th of succeeding month.
ii) Section 6: Reimbursement of Water and Diesel consumption charges:
6.1. In the event LTIL arranges for additional water supply due to any scarcity in the water supply by Municipality/HMWSSB or fall in the ground water level at the demised premises, such charges shall be apportioned pro rata to the space occupied by the Occupant. LTIL will submit invoices to the Occupant by the 25th of each month and Occupant shall reimburse the amounts paid by the LTIL towards water consumption charges on or before 10th of succeeding month.
6.2. In the event of providing power through Diesel generator system due to power cuts/power failures, the Occupant shall pay Diesel charges which shall be charged in proportion to the additional raw power if consumed. LTIL will submit invoices to the Occupant by the 25th of each month and Occupant shall reimburse the amounts paid by the LTIL towards Diesel consumption charges on or before 10th of succeeding month.
iii) Section 3: Maintenance charges & Parking
3.2. Parking Charges:
(a) Occupant shall pay parking charges as follows.
